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  • USD/JPY sellers attack the lower end of the 103.10-25 trading range.
  • Risks struggle for direction amid vaccine hopes, fears of virus strain and Georgia election runoff.
  • US-China tussle, threats from Iran can add to the risk-off mood.
  • A lack of major data/events keeps risk catalysts on the driver’s seat.

USD/JPY looks for a clear direction while taking rounds to 103.10/15 during the initial hour of Tuesday’s Tokyo trading. The yen pair dropped to the fresh low in 10 months the previous day before closing with near opening levels with the Doji candlestick on the daily chart.

The risk-aversion wave, backed by fears of the coronavirus (COVID-19) strain and the cautious mood ahead of the Georgian elections, battles the US dollar recovery and keeps the USD/JPY in a tight range off-late.

While England’s third lockdown, backed by Northern Ireland, earlier zoomed concerns over the covid variant, New York’s case of virus strain found in the UK becomes a four such instance in the US. Also challenging the sentiment could be comments from the Professor of Medicine at Oxford University John Bell suggesting the variant, not from London but South Africa, maybe resilient to vaccines as it has presented “substantial changes in the structure of the virus’ spike protein.”

At home, Japanese media propelled chatters that Tokyo will soon ban all the foreign arrivals to tame the pandemic. As per the latest update from Kyodo News, “Japan plans to declare a state of emergency in Tokyo and three neighboring prefectures this week, possibly on Thursday at the earliest, and lasting for about one month.”

It should be noted that US President-elect Joe Biden recently portrayed a smooth run for $2,000 paychecks if Democrats take over Georgia, which will give them powers in the Senate. Goldman Sachs backs the Democratic victory while saying, There are encouraging signs for Democrats in the Senate runoffs. Prediction markets appear to take the same view and imply nearly even odds that Democrats win both seats, up from around 20% shortly after the November election.

Amid these plays, Japan’s Nikkei 225 drops 0.12% whereas S&P 500 Futures rise 0.20% by press time.

While observing the recent change in the S&P 500 Futures, it can be known that Moderna’s two new vaccines joined the covid cure league with upbeat results.

On the negative side, the US pushes Iran to return South Korea’s tanker while Sino-American tensions are back to the play.

Looking forward, news for viruses and lockdowns, coupled with geopolitical headlines, will be the key for USD/JPY traders ahead of the US ISM Manufacturing PMI.

Technical analysis

Monday’s Doji candlestick on the daily chart challenge USD/JPY sellers even as 21-day SMA and a falling trend line from November 11 restrict immediate upside near 103.60-65.